Google and Intel teaming with Sony to develop Google TV

Citing sources with knowledge of the project, the Times reports that Google and Intel have teamed with Sony to develop Google TV, which will bring the Web into the living room through a new generation of televisions and set-top boxes. The partners reportedly envision technology that will make it as easy for TV users to navigate Web applications. Google intends to open the Android-based platform to developers. The companies are said to have selected Logitech (LOGI) to develop a remote with a tiny keyboard. The project has been under way for several months. From the New York Times. Read More!

Studios play hardball to get theaters to book 3D offerings

Industry executives say that Paramount (VIA) is refusing to offer theaters 2D versions of How to Train Your Dragon if they choose not to show the 3D version. Many multiplexes only have one 3D screen, which means to get the DreamWorks Animation (DWA) picture at all, they would need to bump either Warner Bros (TWX)'s Clash of the Titans or Disney (DIS)'s Alice in Wonderland. From the LA Times. Read More!

JPMorgan believes Intel will outperform Texas Instruments in 2010

The firm notes better end demand and sees a decline in TXN's lead times and risk to TXN from the exit of its baseband business. JPMorgan continues to prefer TXN over INTC over a 3-to-5 year timeframe. Both stocks remain rated neutral. INTC target is $17; TXN target is $21. Read More!

Yahoo! named as the exclusive search service on Telefonica’s mobile portal in Spain

YHOO and Telefónica España, Spain’s largest operator network, announced that YHOO is powering the mobile Internet search and sponsored search advertising on Telefónica’s emocion portal.

So all is not dead for Yahoo! Read More!

Memo to Karl Icahn: Talk to Expedia Management

This is the tale of two online travel companies – company A and company B.

Company A raked in $21.8 billion of gross travel bookings in 2009 and is by far the largest online travel company. It generated $3 billion in fees, or revenues, from those bookings. Those fees are expected to grow 17% in 2010, according to consensus. EBITDA is expected to reach nearly $950 million in 2010, up 12% YoY. Its market cap is $7 billion and the shares trade at an EV/EBITDA multiple of 6.7x. The company is levered at 1.1x debt to TTM EBITDA and pays a quarterly dividend of 7 cents a share, the only Internet company to do so. It also trades at a PE multiple of 14.7x 2010 EPS with a PEG of 1.1x and has a 10.5% free-cash-flow yield with FCF per share growing 16% in 2010.

Company B raked in $9.3 billion in gross travel bookings in 2009 and generated $2.3 billion in fees from those bookings. Its revenues are expected to grow 19% in 2010 and EBITDA expected to grow 25% to $730 million, so margins are expanding. It has a market cap of $10.7 billion and trades at an EV/EBITDA multiple of 14.5x. It is levered at 0.9x debt to TTM EBITDA. Company B also trades at a PE multiple of 21.2x 2010 EPS with a PEG of 1.0x and has a 5.4% free-cash-flow yield with FCF per share growing 18% in 2010.

Company A is Expedia and Company B is Priceline. Priceline in my view is properly valued and has more room to run while Expedia is undervalued. Priceline has been taking share in the lucrative European hotels booking business. However, Expedia’s results over the past year has been good, beating consensus expectations in every quarter in the past year. Despite that, the shares have languished, dropping 25% since last October 2009, while Priceline’s shares have soared.

I have written about the disparity in the past, see previous write-up Flying High With Expedia. I am repeating the analysis here, which shows that if one were to value Expedia at Priceline’s EBITDA multiple, then Expedia’s shares would be worth $45 per share, 93% above the current share price. The 10.5% FCF yield is extremely attractive. Many Internet companies trade at less than half that yield, implying that EXPE shares should at least be worth 50% above the current share price.

This is clearly a situation that should not persist. Management should use its cash to buy back shares. In fact, I believe the model is underlevered at 1.0x EBITDA. The company should lever the balance sheet to about 2.5x EBITDA and use the cash to shrink the equity by approximately 15%. Other ideas for value creation include selling several online travel assets. It can also look at spinning off TripAdvisor into a separate publicly traded company.

So I am recommending that activist investors buy the shares and force management to enhance shareholder value by employing the suggestions above. The largest shareholder, John Malone, has to be displeased with the valuation. Or maybe it is time for private equity firms take another look at the sector. TMTAnalyst.


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AOL: 1Q10 Domestic Display Advertising Down YoY

In the 10K filing, AOL stated that its 1Q2010 domestic display advertising will be down year-over-year compared to the 1% growth in 4Q09 and the flat guidance for 1Q2010 provided recently on the 4Q09 earnings conference call. AOL cites its advertising sales organization restructuring which resulted in the reassignment of a majority of advertising accounts, significantly lower monetization of AOL Properties through its Third Party Network and an approximate $5M reduction in advertising revenue related to legacy agreements on certain AOL Properties.

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Disney Threatens to Pull ABC from Cablevision

Disney is stating in commercials that it wants Cablevision to pay monthly fees to bean WABC to New York Cablevision households. Cablevision is stating that Disney wants $40 million in fees. TMTAnalyst

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